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SANM's Operating Margin Growth Moderates: Can Growth Be Sustained?
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Key Takeaways
Sanmina's non-GAAP operating margin rose to 6% from 5.6% as AI and cloud demand supported profitability.
CPS revenues grew 4.3% while Integrated Manufacturing Solutions revenue surged 72.2% year over year.
SANM's SG&A expenses jumped due to ZT Systems acquisition and integration costs impacting margins.
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating income totaling $192 million compared with $112.7 million in the year-ago period. Non-GAAP operating margin was 6%, marginally up from 5.6% in the prior-year quarter.
The company’s operating margin continues to be driven by solid demand in the AI and cloud infrastructure domains. A favorable product mix and focus on improving efficiency are other positive factors. Its Components, Products and Services (CPS) business, which includes advanced PCBs, microelectronics, storage products, defense/aerospace products, engineering, logistics and repair services, is driving greater margin expansion.
The Components, Products, and Services segment revenues were $434 million, up 4.33% year over year. Revenues from the Integrated Manufacturing Solutions segment were $2.79 billion in revenues, up 72.2% year over year. Such strong revenue growth supported the operating margin.
It is to be noted that in the first quarter of fiscal 2026, the company’s Selling, general and administrative expenses surged to $114.8 million from $70.8 million. The acquisition and integration costs were $43.4 million. Such a sharp increase is because Sanmina had to incorporate the financials for 2 months of the recently acquired ZT Systems. The buyout has led our cost base for the company, which is impacting the operating margin.
How are the Competitors Faring?
The company faces competition from Jabil, Inc. (JBL - Free Report) and Flex Ltd. (FLEX - Free Report) in this domain. Jabil reported a non-GAAP operating income of $436 million, up from $334 million in the year-ago period. Non-GAAP operating margin was 5.3%, up from the year-ago quarter’s figure of 5%. Healthy demand in the AI infrastructure domain, strong focus on efficiency, are boosting Jabil’s margin.
Flex’s Non-GAAP operating income came in at $460 million, up from $399 million reported a year ago. Non-GAAP operating margin expanded 70 bps to 6.2%. Flex’s Margin expansion was driven by a favorable strategic product mix and disciplined operating cost management.
SANM's Price Performance, Valuation & Estimates
Sanmina shares have surged 106% compared with the industry’s growth of 183.2%.
Image Source: Zacks Investment Research
From a valuation standpoint, the company’s shares currently trade at 13.58x forward 12-month earnings, lower than the industry tally of 26.65x.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have moved up 1.29% to $10.19 per share over the past 60 days, while the same for 2027 has increased 1.98% to $12.35.
View the Zacks #1 Rank List
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SANM's Operating Margin Growth Moderates: Can Growth Be Sustained?
Key Takeaways
Sanmina Corporation (SANM - Free Report) reported a non-GAAP operating income totaling $192 million compared with $112.7 million in the year-ago period. Non-GAAP operating margin was 6%, marginally up from 5.6% in the prior-year quarter.
The company’s operating margin continues to be driven by solid demand in the AI and cloud infrastructure domains. A favorable product mix and focus on improving efficiency are other positive factors. Its Components, Products and Services (CPS) business, which includes advanced PCBs, microelectronics, storage products, defense/aerospace products, engineering, logistics and repair services, is driving greater margin expansion.
The Components, Products, and Services segment revenues were $434 million, up 4.33% year over year. Revenues from the Integrated Manufacturing Solutions segment were $2.79 billion in revenues, up 72.2% year over year. Such strong revenue growth supported the operating margin.
It is to be noted that in the first quarter of fiscal 2026, the company’s Selling, general and administrative expenses surged to $114.8 million from $70.8 million. The acquisition and integration costs were $43.4 million. Such a sharp increase is because Sanmina had to incorporate the financials for 2 months of the recently acquired ZT Systems. The buyout has led our cost base for the company, which is impacting the operating margin.
How are the Competitors Faring?
The company faces competition from Jabil, Inc. (JBL - Free Report) and Flex Ltd. (FLEX - Free Report) in this domain. Jabil reported a non-GAAP operating income of $436 million, up from $334 million in the year-ago period. Non-GAAP operating margin was 5.3%, up from the year-ago quarter’s figure of 5%. Healthy demand in the AI infrastructure domain, strong focus on efficiency, are boosting Jabil’s margin.
Flex’s Non-GAAP operating income came in at $460 million, up from $399 million reported a year ago. Non-GAAP operating margin expanded 70 bps to 6.2%. Flex’s Margin expansion was driven by a favorable strategic product mix and disciplined operating cost management.
SANM's Price Performance, Valuation & Estimates
Sanmina shares have surged 106% compared with the industry’s growth of 183.2%.
Image Source: Zacks Investment Research
From a valuation standpoint, the company’s shares currently trade at 13.58x forward 12-month earnings, lower than the industry tally of 26.65x.
Image Source: Zacks Investment Research
Earnings estimates for 2026 have moved up 1.29% to $10.19 per share over the past 60 days, while the same for 2027 has increased 1.98% to $12.35.
Image Source: Zacks Investment Research
Sanmina currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.